The current interest rate environment could be beneficial for the Japanese corporation SoftBank Corporation According to CLSA’s Oliver Matthew, a long-term investment strategy can buy early-stage tech companies at lower valuations.
With the price of potential acquisitions now dropping as investors drive interest rates higher, Matthew told CNBC’s “Squawk Box Asia” on Wednesday that SoftBank is likely to “get a deal.” better.”
However, he acknowledged that the drop in valuations for listed growth companies this year has also been a headwind for the Japanese conglomerate’s shares. The valuations of growth companies in areas like technology tend to suffer in a higher interest rate environment because it makes their future earnings look less attractive.
SoftBank’s Vision Fund is a powerhouse in venture capital, investing in everything from Uber for the Chinese tech giant Alibaba. Caught in Beijing’s ongoing regulatory crackdown on its domestic tech sector, SoftBank had to cut its stake in companies like Uber to make up for those losses.
Arm IPO: A catalyst for SoftBank shares?
The Arm .’s IPO expected Matthew, head of consumer Asia at CLSA, said it was also a catalyst for SoftBank Group shares.
Shares of SoftBank Group in Japan jumped nearly 6% on Wednesday after the company announced it would seek a potential listing for its Arm unit. Some of the gains were then cut back, with shares down about 3% in Thursday morning trading.
The Japanese conglomerate originally planned to sell Arm to Nvidia, but the deal fell through amid tight regulatory scrutiny.
The deal was announced back in 2020 and is worth $40 billion in Nvidia stock and cash. With a discount right now, Arm is set to go public during the financial year ending March 31, 2023.
“When they did the deal with Nvidia, it was a bit complicated because they were taking two-thirds of Nvidia’s stock price – Matthew said. As a result, the Japanese conglomerate is likely to seek a higher valuation and let Arm go public “for a pretty decent price”.
SoftBank bought Arm in 2016 for $32 billion.
